Mirant debt drops on wider loss; WorldCom, Loral continue to rise; Collins & Aikman lower

By Carlise Newman

Chicago, Oct. 28 - Mirant Corp. fell Tuesday in response to its report of a steep second-quarter net loss after writing off all the goodwill associated with its North American businesses.

Mirant said it recently reviewed $2.1 billion of goodwill on its balance sheet that was associated with its power generation and energy marketing operations in the United States and Canada, in compliance with accounting rules. As a result Mirant, which filed for Chapter 11 bankruptcy protection on July 14, concluded that it must fully write off the goodwill and record a non-cash charge.

Mirant's 7 5/8% notes due 2006 dipped to 82¾ bid from 84 bid. The bonds had reached levels in the mid-80s week ago, up from levels in the mid-70s mid-October.

"Mirant paper was already heading lower before the earnings news, and fell yesterday in anticipation. Everyone new it wouldn't be good news," a trader said said.

Mirant reported a second-quarter net loss of $2.2 billion, or $5.44 a share. The company's restated second-quarter net loss was $182 million, or 45 cents a share, a year earlier.

Mirant said the charge does not affect the company's plans to re-emerge from Chapter 11 bankruptcy protection or drain its cash balances.

The Atlanta-based power company said cash balances would fall over the next six months amid seasonally weak periods for power sales. The company as of Oct. 17 had $1.62 billion in cash and equivalents, though $568 million of that amount is restricted.

Quarterly operating revenue rose $130 million, or 10%, to $1.25 billion on higher wholesale power prices, offset in part by reduced demand thanks to milder summer weather. But expenses also rose, reflecting sharply higher costs for natural gas and fuel oil as well as hedging losses.

As a result the company's gross margin narrowed by 14% to $463 million.

Elsewhere, WorldCom Inc. was quoted 2 points higher at 37½ bid, 38 offered, one trader said.

"This is the highest levels the paper has seen in months. It was trading in the mid-20s at the beginning of the summer, moved to the low 30s and then dropped again. Lately it's been in the mid-30s," he said.

The bankrupt Ashburn, Va.-based telephone company has been rising slowly but steadily, even when it released lower income figures for August a few weeks ago. WorldCom said its net income totaled $132 million in August, compared with $207 million in July. Revenues fell to $2 billion, down from $2.1 billion in July.

Loral Space & Communication Inc. was still rising Tuesday after obtaining court approval for the sale of its satellites to Intelsat Ltd.

Loral's 10% notes due 2006 were up 1 point on the session at 76 bid, one trader said. Last week, the bonds jumped around at all levels; down 10 points on Tuesday, up 3 on Wednesday, and ending the week 4 points lower on Friday at 73 bid.

The New York-based satellite operator on Friday said the U.S. Bankruptcy Court for the Southern District of New York has approved the sale of Loral's North American satellites for up to $1.1 billion to Intelsat.

The agreement with Intelsat provides for the sale of the in-orbit Telstars 5, 6, 7 and 13, as well as Telstar 8, which is scheduled to be launched in mid 2004. The agreement also includes rights to the 77 degrees West longitude orbital slot, formerly occupied by Telstar 4.

The sale to Intelsat remains subject to Federal Communications Commission approval and is expected to close in early 2004.

In other news, Solutia Inc.'s 7 3/8% notes due 2027 were quoted up ½ point at 58 bid, 58½ offered, an improvement since reporting weak third-quarter earnings recently.

Collins & Aikman Corp.'s 11½% notes due 2006 were down ½ point to 72½ bid, while its 10¾% notes due 2011 were also down ½ point to 82 bid. The auto parts distributor had seen some gains a few weeks ago when it announced it was chosen by Ford Motor Co. to supply interior components for the new Futura sedan. Prior to that, the bonds sank when Chrysler Group, the U.S. unit of DaimlerChrysler AG, said it was ready to drop all current and future contracts with the company.

WestPoint Stevens Inc.'s 7 7/8% notes due 2008 were seen at 12 bid, down 1 point, according to a trader.

"They've kind of been in limbo for a while since they said they were going with a new restructuring," he added.

On Oct. 23, the WestPoint, Ga.-based home fashions maker obtained court approval to extend the company's exclusive right to file reorganization plan from Jan. 31, 2004 until March 31, 2004.

And before that WestPoint Stevens said it had decided not to implement the previously announced agreement in principle with holders of its outstanding unsecured debt. Instead, the company will negotiate new terms for a chapter 11 plan of reorganization with all its major creditor constituencies.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.